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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

California District Court Avoids Addressing Controlling Standard for Determining Amount in Controversy

Posted in Case Summaries

Ornelas v. Children’s Place Retail Stores, Inc., 2013 WL 2468388 (C.D.Cal. June 5, 2013).

A District Court in California avoided addressing the effect of a recent Ninth Circuit decision on the controlling standard for determining the amount in controversy in a removed case where Plaintiff has pled less than the jurisdictional amount.

The plaintiff, a non-exempt sales associate, brought a putative class action in the Los Angeles County Superior Court alleging failure to provide proper overtime compensation, proper minimum wages for off-the-clock work, required meal periods and required rest periods or proper compensation in lieu thereof, complete and accurate wage statements, and timely payments of wages, both during employment and upon termination.

The Complaint alleged that the aggregate amount in controversy including monetary damages, restitution, penalties, injunctive relief, and attorneys’ fees, was less than $5,000,000, exclusive of interest and costs.

The defendant removed the action to the District Court under CAFA.  Thereafter, the plaintiff moved to remand for lack of subject matter jurisdiction.  The District Court granted the motion and remanded the action to the state court.

Under CAFA, federal district courts have original jurisdiction over class actions in which the amount in controversy exceeds $5 million; any class member is a citizen of a state different from any defendant; and the number the proposed class is 100 or greater.  In any class action, the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5 million, exclusive of interest and costs.

The District Court noted that Lowdermilk v. United States Bank National Association, 479 F.3d 994, 1000 (9th Cir. 2007) held that, in a removal under CAFA, where the plaintiff has pled an amount in controversy less than $5 million, the party seeking removal must prove with legal certainty that CAFA’s jurisdictional amount is met.

Further, the District Court noted that Standard Fire Insurance Company v. Knowles, 133 S. Ct. 1349, 1347 (2013), held that a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified, and that a stipulation by the plaintiff to not seek damages for the class in excess of $5 million in the aggregate, could not remove the case from CAFA’s scope. (Editors’ Note: see CAFA law blog analysis of Standard Fire posted on April 12, 2013).

The plaintiff argued that Lowdermilk remains controlling after Standard Fire, that the legal certainty standard continues to apply, and that, even under the preponderance of the evidence standard, the action should be remanded because the defendant did not provide evidence sufficient to meet this standard with respect to whether the amount in controversy was at least $5 million.

The District Court stated that because the evidence presented by the defendant regarding the amount in controversy did not show by a preponderance of evidence that the amount in controversy exceeded $5 million, the issue whether Lowdermilk’s legal certainty standard remains controlling after Standard Fire need not be addressed.  The District Court remarked that outside of Lowdermilk, the preponderance of the evidence standard applies in determining whether the jurisdictional amount has been shown in a removed case.

The defendant submitted the declaration of its vice president of human resources, which stated that approximately 9,860 non-exempt employees worked in California as sales associates from February 25, 2009 to March 28, 2013 of which 8,650 were former employees, and approximately 3,560 non-exempt employees worked in California as sales associates from February 25, 2012 to March 2, 2013 of which 2,400 were former employees.

Based on this evidence, the defendant’s counsel performed calculations using various assumptions, including an $8 average hourly wage, 12-week periods of employment, and six-hour shifts.  The defendant’s counsel also made assumptions about the frequency of violations, including two hours of unpaid off-the-clock work per week per employee, one hour of unpaid overtime work per week per employee, one missed meal period per week per employee, one missed rest period per week per employee, and six noncompliant wage statements per employee.

Based on these assumptions, the defendant argued that the potential claims in this matter amounted to $20,566,640.  The defendant’s counsel also asserted that a potential award of attorney’s fees was $591,600, which was 25 percent of the potential liability under the first and second causes of action, not including liquidated damages.

The District Court opined that a declaration stating the number of employees who worked for the defendant during the years prior to this action, together with assumptions about these employees, was insufficient to establish that it was more likely than not that the amount in controversy exceeded $5 million.

The District Court remarked that the defendant was in the best position to adduce evidence regarding the average period of employment, the average length of a shift, and the average number of wage statements of its current and former employees.  The District Court also stated that the defendant could have conducted a sampling or other analysis demonstrating that it was more likely than not that many of their employees regularly worked more than eight hours in a day to support calculations regarding potential overtime claims.

Here, however, defendant only provided evidence about the potential size of the class and relied on several unsupported assumptions to claim that the jurisdictional threshold had been met.  Further, although the defendant’s counsel indicated that it could provide more information on this issue over time, the District Court observed that the action was filed more than three months ago and removed more than two months ago.  Thus, there was no showing that the evidence could not have been assembled and presented in opposition to the motion to remand.

Considering the strong presumption against removal, the standards applicable to establishing the amount in controversy of this case, and the limited evidence provided by the defendant, the District Court ruled that jurisdiction had not been shown.

Accordingly, the District Court remanded the action to the state court.